US says China spied on American companies

WASHINGTON, May 19, 2014 — The United States today directly challenged Beijing by indicting five Chinese military officers for economic espionage.

The U.S. Justice Department said the indictment accuses Chinese officials of economic espionage, alleging they conspired to steal trade secrets and other proprietary information from U.S. companies. The charges list Westinghouse Electric Co., United States Steel Corp and Alcoa, Inc. as some of the companies targeted by the Chinese.

Attorney General Eric Holder said, “This is a case alleging economic espionage by members of the Chinese military and represents the first ever charges against a state actor for this type of hacking.”

The five officers are part of Unit 61398 of the Third Department of the Chinese People’s Liberation Army.

Last year, private security company Mandiant released a detailed report about the activities of Unit 61398, its extensive targeting of U.S. companies, and said that based on the extent of the operations, the unit almost certainly was acting with the approval of the government of China. It further suggested that the actions were likely at the direction of the Chinese government.

The report detailed more than 141 attacks by the Unit against U.S. and other foreign corporations over seven years.

Mandiant’s study located the Internet protocol addresses used in the attacks against private companies and then mined open-source data to identify individuals associated with the unit.

According to Mandiant, the top targets of the unit are information technology, aerospace, public administration, satellites and telecommunications, and scientific research and consulting.

Only a few months after Mandiant released its report, a confidential Pentagon study was leaked to the Washington Post which alleged that China had obtained information on America’s most sensitive weapons systems. Defense analysts categorized the breaches as “breathtaking” and “worth billions of dollars” to the Chinese.

According to the report, at least 24 valuable advanced weapons systems were compromised, including the PAC-3, the Terminal High Altitude Area Defense (THAAD), and the Navy’s Aegis missile defense system.

Analysts say that if the United States and China were to enter a military conflict, China would likely have a major advantage, thanks to knowledge gained about U.S. military capabilities from cyber-attacks.

The report further noted that the United States is ill-equipped to counter cyber-attacks by the Chinese or anyone else.

Washington has privately approached China over the issue of cyber-espionage, but this is the first time Washington has forcibly acted to indict the culprits.

China has consistently denied any military involvement in cyber-espionage and is likely to repeat those denials.

However, U.S. and international security experts say economic espionage by China is an open secret.

According to Luke Bencie, author of Among Enemies, China’s activities against U.S. companies is “not a big secret.” Bencie notes that for every attack that is detected, “100 others are never detected.”

The FBI says economic espionage costs $300 billion a year.

The indictments are a clear warning to China that the U.S. will not tolerate espionage, cyber or otherwise. However, despite the charges, the United States is virtually powerless to stop the threat, and China is highly unlikely to curb its espionage activities against the U.S. or other foreign companies.

Lisa M. Ruth writes on international events, intelligence, and other topics. She has worked with CDN as a journalist since 2009.

Lisa is also President of CTC International Group, Inc., a research and analysis firm in South Florida, providing actionable intelligence to decisionmakers. She started her career at the CIA, where she won several distinguished awards for her service.

She holds an MA in international relations from the University of Virginia, and a BA in international relations from George Mason University. She also serves as Chairman of the Board of Horses Healing Hearts, and is involved with several other charitable organizations, including Habitat for Humanity, The Boys and Girls Clubs of America, and AYSO.